Why Underinsurance Could Leave Care Homes Exposed

Underinsurance remains one of the most significant yet often overlooked risks facing care home operators across the UK. While providers work hard to manage operational, regulatory and staffing challenges, many may not realise that their insurance sums insured no longer accurately reflect the true value of their buildings, contents or business interruption exposures.

Unfortunately, underinsurance often only comes to light when a claim is made, at which point the financial consequences can be substantial.

What is Underinsurance?

Underinsurance occurs when a property, asset or business is insured for less than its actual replacement, rebuilding or recovery cost.

For care homes, this can affect:

• Buildings and premises
• Contents and equipment
• Specialist medical equipment
• Fixtures and fittings
• Business Interruption cover

If the sums insured are inadequate, insurers may reduce claim payments proportionately, leaving the care home responsible for funding the shortfall. This can create significant financial pressure at a time when the organisation is already dealing with the impact of a major loss.

Why Care Homes Are Particularly Vulnerable

Care homes often have unique property and operational characteristics that make accurate valuations especially important.

Many facilities contain specialist adaptations, mobility equipment, nurse call systems, lifts, commercial kitchens and fire protection systems. Rebuilding or replacing these assets following a significant loss can be far more expensive than many operators realise.

In addition, rising construction costs, labour shortages and inflation have increased rebuilding and repair costs across the UK in recent years. Providers that have not reviewed their sums insured for a number of years may find that cover no longer reflects the true cost of reinstatement.

The Impact of Business Interruption

Property damage is often only part of the story.

If a care home suffers a major incident such as fire or flooding, there may be significant disruption to operations. Residents may need to be relocated, income may be affected and additional costs may arise while services are restored.

Business Interruption Insurance is designed to help organisations recover from these events, but if indemnity periods or financial projections are outdated, recovery costs may not be adequately covered.

When Was Your Insurance Last Reviewed?

Many care providers review their insurance annually, but fewer review the underlying values and sums insured on which cover is based.

Changes such as property improvements, extensions, investment in equipment or increases in operating costs can all affect the level of cover required.

Regular reviews can help ensure insurance arrangements continue to reflect the true scale and complexity of the organisation's operations.

Protecting Your Organisation's Future

Care homes provide essential services to some of the most vulnerable members of society. A major uninsured or underinsured loss could have serious consequences for residents, employees and the long-term viability of the organisation.

Taking time to review insurance arrangements, property valuations and business interruption requirements can help reduce the risk of unexpected shortfalls and provide greater confidence that the organisation is adequately protected.

How Pollensa Insurance Services Can Help

At Pollensa Insurance Services, we understand the unique challenges facing elderly care and nursing home providers.

We work closely with organisations across the care sector to help identify potential areas of underinsurance and arrange insurance solutions tailored to their individual requirements.

For more information about insurance for Care Homes and Nursing Homes, contact Pollensa Insurance Services on 01778 303111 or email enquiries@pollensa-insurance.co.uk